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GBP/USD flirts with $1.37 amid AstraZeneca vaccine uncertainty

Philip McHugh March 17th 2021 - 2 minute read

The pound fluctuated on Tuesday as AstraZeneca vaccine concerns weighed heavily on the UK currency.
 
Meanwhile, Sterling is showing modest gains so far this morning, with GBP/EUR buoyed at €1.1703 and GBP/USD stable at $1.3913. GBP/CAD has ticked up to C$1.7335, while GBP/AUD and GBP/NZD climb to AU$1.7997 and NZ$1.9375, respectively.
 
Coming up today, the spotlight will be on the Federal Reserve’s latest policy decision, with USD exchange rates being driven by the bank’s forward guidance.
 

What’s been happening?

The pound tumbled through the first half of yesterday’s European trading session, retreating in response to the news that several European countries had suspended the use of the AstraZeneca vaccine, which has been championed by the UK government.
 
Sterling was able to claw back the majority of these losses in the second half of the session, however, after the European Medicines Agency (EMA) said there is no indication that the AstraZeneca vaccine is linked to blood clots.
 
The euro, meanwhile, also came under pressure due to the suspension of the AstraZeneca vaccine, amidst fears it would further hamper Europe’s vaccination efforts, offsetting some stronger-than-expected economic sentiment figures from Germany in the process.
 
Finally, we saw the US dollar trend higher again on Tuesday, with the appeal of the safe-haven currency being bolstered by market vaccine jitters, in spite of some disappointing US retail sales figures.
 

What’s coming up?

Top of the agenda today will be the Federal Reserve’s latest rate decision, which is widely expected to see the bank opt to leave its monetary policy untouched this month.
 
Instead, the primary focus for USD investors will be on the Fed’s accompanying policy statement, which could weaken the appeal of the US dollar if Jerome Powell just reinforces the bank’s current dovish bias, by reiterating that it will be some time before the bank looks to start tightening its monetary policy again.
 
On the other hand, should the bank remain reluctant to address the recent surge in yields in any meaningful way then the US dollar could maintain its positive trajectory.
 
For EUR investors the focus today will be on the Eurozone’s latest CPI release, where confirmation that inflation stalled last month could dent the euro.
 
At the same time, any movement in the pound is likely to be limited today as GBP investors seek to avoid making any aggressive bets ahead of the Bank of England's (BoE) rate decision on Thursday.

Written by
Philip McHugh

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